FHA Minimum Credit Score Requirements On Home Purchase
This Article Is About The FHA Minimum Credit Score Requirements On Home Purchase
One of the most common questions I have been getting recently from my viewers is what are FHA Minimum Credit Score Requirements to qualify for an FHA loan with a 3.5% down payment. Many folks who contact me are often confused. This is because they get different answers when they consult with loan officers at other lenders as to the question of what the FHA Minimum Credit Score Requirements are. Unfortunately, many loan officers only tell borrowers FHA Minimum Credit Score Requirements are from their lending institution. NOT what the actual credit score requirements are per FHA Guidelines On Credit Scores. In this article, we will discuss and cover the minimum credit score requirements to qualify for FHA loans.
FHA Minimum Credit Score Requirements Versus Lender Overlays
Some loan officers tell borrowers FHA minimum credit score requirements are 640. While others tell them it is 620. These loan officers are actually telling borrowers that the 640 Credit Scores, or 620 FICO. FHA Minimum Credit Score Requirements of the mortgage company they represent may be higher than the minimum required by HUD. Lenders can have higher credit score requirements and NOT the actual Credit Scores Required by FHA. The credit scores they are stating are that particular lender’s Overlays On Credit Scores. NOT HUD’s FHA Minimum Credit Score Requirements. HUD, the United States Department of Housing and Urban Development, is the parent of the FHA. The Federal Housing Administration and FHA is the entity that sets FHA Minimum Credit Score Requirements.
HUD Guidelines On Credit Scores
Here is HUD’s Minimum Credit Score Guidelines on FHA loans:
- Borrowers with credit scores of at least a 580 FICO, can qualify for an FHA loan with a 3.5% down payment
- The maximum debt to income ratio allowed is 43% DTI for them to get an approve/eligible per Automated Underwriting System
If a borrower has a credit score of at least a 620 Credit Score, borrowers can qualify for FHA Loans with a 3.5% down payment:
- But the maximum debt to income ratio can go as high as 56.9% DTI on the back end and the maximum front is 46.9% DTI to get an approve/eligible per Automated Underwriting System
A borrower with credit scores of under 580 Credit Scores can qualify for FHA Loans with a 10% down payment with compensating factors.
FHA Minimum Credit Score Requirements On Home Purchase Loans
The HUD 4000.1 FHA Handbook is the latest Guidelines Mortgage Lenders need to follow in order to originate and fund FHA Loans. Changes in HUD Guidelines do happen with little to no notice. This happens without notice due to changes in mortgage requirements because of legislation and regulations. These changes can happen often and lenders and consumers need to be aware of these changes. FHA Guidelines that were effective a year ago may no longer be good today. FHA Minimum Credit Score Requirements on require 3.5% down payment is set at 580 Credit Score.
How Low Can Borrowers Credit Scores Be To Qualify For FHA Home Loans
Borrowers with credit scores between and 579 FICO Credit Scores can qualify for FHA Loans. However, these borrowers are limited to 90% LTV, Loan To Value. This means a 10% down payment is required. Any borrower with under 500 Credit Scores is not eligible until they can get their credit scores to a 500 FICO Minimum. Again, for anyone with credit scores of under 580 credit scores, a 10% down payment is required. Although HUD states borrowers with under 580 FICO credit scores and 10% down payment are eligible for FHA Loans, borrowers will need to get an approve/eligible per automated underwriting system. Borrowers with credit scores under 580 FICO will get higher rates. It is best to get credit scores boosted to at least a 580 FICO.
Advice In Raising Credit Scores To Qualify For Mortgage
You can qualify for an FHA Loan with low credit scores. As mentioned above, it is best to try to raise your credit scores to at least a 580 FICO Credit Score and then apply for an FHA instead of trying to get a pre-approval under a 580 FICO Credit Score. Many folks do not realize how easy and streamlined it can be in trying to raise your credit score. Here are some quick tips on boosting your credit scores so you can qualify for a mortgage. Consumers with no revolving credit tradelines, just getting one to three secured credit cards with at least a $500 credit limit can boost credit scores. One secured credit card can boost your credit scores by at least 20 or more FICO points. If you have a family member who lives with you at the same address or a family member with the same last name, adding yourself as an authorized user to their credit card will boost credit scores. It automatically treats it as seasoned credit tradelines. However, the main cardholder had to have had a perfect payment history with no late payment. Also need very low credit utilization ratio which means a credit card balance of 10% of the available credit limit. HUD exempts credit disputes on medical collection accounts. If you have recent medical collection accounts, dispute them. Whenever you do a credit dispute, the credit bureaus will take that derogatory credit item from the FICO credit scoring model. So it is like not having that derogatory credit item. Therefore, it will boost consumer credit scores. However, this technique needs to be timed properly. It is only good for a short-term band-aid and remedy and not a long-term solution. Borrowers getting the runaround from other lenders do not qualify for FHA Loans because they have credit scores under 620 FICO, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected]